Friday

Apr 6, 2018 at 2:25 PM

If Adam McKay is looking for material to construct a sequel to his Oscar-winning screenplay for “The Big Short,” may I direct him toward “The China Hustle”? It’s got everything he needs from overvalued stocks to immoral brokers to royally screwed investors. Oh, and toss in a former presidential candidate caught with his hands in a $50 billion cookie jar and a sleazy investment banker who fancies himself the second coming of Jordan Belfort, the rock’n, snortin’ hotshot from “The Wolf of Wall Street.”

What in the name of Elizabeth Warren is going on?

Well, if you’re up for 84 informative, fast-paced minutes of facts every bit as scary as anything in “The Shining,” documentarian Jed Rothstein will be more than happy to enlighten. And you could not ask for a more astute guide to explain nuggets like “reverse mergers,” “shorting” and how they pertain to the rise and fall of the great gall of China; or, as unscrupulous brokers referred to it, the Gold Rush of 2006 to 2012.

Here’s the set-up: After the 2008 crash, brokerages needed a quick fix for the millions their clients lost. Enter China, which was in the midst of a huge building boom; meaning there were billions to be made. But Chinese companies can’t list on the Exchange without traversing mounds of red tape. No problem, just gain access via those aforementioned reverse mergers, which enable Chinese corporations to acquire failed American businesses still registered on the Exchange. Then you just offer eager Yankee investors a chance to buy into those companies, which at their peak were reaping gains of 500 percent. Soon, the big players were recouping all they lost in 2008.

One problem, and it’s a big one; most of those estimated 300 reverse merger outfits were lying bigly about their profits and assets. But for a long while no one back in the States knew about it. Eventually, thanks to some clever espionage tactics, a handful of brokers found out and panicked, cashing regular stocks in for short stocks, meaning they bet heavily that these phony Chinese businesses would go belly up; and when they did, the brokers would make billions, while their customers - many of them owners of IRAs and pension funds - were left holding the bag. Or, as one talking head quips, “it’s like musical chairs,” when the song stops, whoever is holding the phony shares are the victims.

And it wasn’t pretty, as one 68-year-old man tells Rothstein, the stock he bought for $9 a share dropped to 12 cents, reducing his retirement fund by more than $150,000.

Yes, this is one of those documentaries - like “Abacus” and “Enron” - that make you boiling mad at greedy bankers, ineffectual politicians and a financial system shedding regulations like the snakes that these people are shed their skin. Dan David, a broker working out of tiny Skippack, Pa., readily admits he’s one of them, informing us in the film’s opening minutes, “there are no good guys in this story, including me.” He’s not kidding, although Dan’s unbridled honesty makes him the de facto John Wayne of the piece.

The blackest of the black hat wearers are long-in-the-tooth frat boy Byron Roth, the hard-partying CEO of Roth Capital, and 2004 presidential candidate and retired general Wesley Clark, the CEO of now-defunct Rodman & Renshaw Capital. Where Roth only appears via an iPhone capturing him sauced and stage diving in front of a rock band at one of his legendary California blowouts for investors, Clark at least has the nerve to appear in front of Rothstein’s camera - or, at least he does until he realizes how cold and clueless he sounds and walks off. Of course, there also must be a lawyer involved; and Rothstein lands a beauty in Michael Nussbaum of Loeb & Loeb. The counselor tries to justify his actions in helping fudge the numbers, but he just looks sleazier doing it.

At least our friend Dan has a conscience, lobbying Congress for more regulation and forming a band of muckrakers bent on bankrupting all the phony Chinese corporations. When Dan returns to his boarded-up hometown of Flint, Mich., itself a victim of unmitigated greed, you might actually find yourself liking him, especially when he attempts to explain “shorting” to his open-mouthed relatives during a rare moment of levity.

Mostly, the concise, neatly packaged “China Hustle” retains a tone that’s unnerving, as Rothstein dredges up more and more dread, like the fact that it’s legal in China for its business owners to defraud foreign investors. But what really gets your dander up are the feckless politicians, Liz Warren aside, in Washington who have zero interest in angering their biggest Wall Street contributors. Not to mention under funding the SEC to the point it has neither the time nor the staff to stay on top of all the malfeasance.

That’s probably why there has been only one measly prosecution resulting from a China ruse that bilked Americans of an estimated $50 billion, the biggest financial fraud since Bernie Madoff. Now, that’s some bad company.

In the end, Rothstein asks us to mull two things, one the belief that in today’s lawless environment, the only way to get ahead is to break the rules. And the second, which involves the current occupant of the White House, is an ominous clip of Trump backslapping with Jack Ma, the CEO of China’s version of Amazon, Alibaba, itself a suspected purveyor of overinflated stocks (“It’s like buying a lottery ticket,” says one expert.). It ends with Ma telling the president and others, “Just trust us.”

After what we’ve just seen over the previous 80 unsettling minutes, there’s no chance in hell.